Banks set cap on quick payments service

Banks' cap on fund transfer to quick payment

Annualized seven-day yield of online finance products 2014 Graphics: GT Compiled by GT

China's major banks have set transfer caps for online quick payment services, making it harder for users to transfer large amounts of money to Internet wealth management platforms such as Yu'ebao, the Beijing News reported Thursday.

China Construction Bank has set a quota of 50,000 yuan ($8,150) for each quick transfer per day while Industrial Bank Co has imposed a cap of 5,000 yuan per day per transfer, according to the report.

A customer service staff member from Agricultural Bank of China (ABC) told the Global Times Thursday that they had announced in February the limit of 10,000 yuan per day for quick transfer. China Minsheng Banking Corp (CMB) has set a limit for daily transfers to 5,000 yuan per transfer, a staff member from the bank told the Global Times.

The quick payment solution was first introduced by Alipay, a third-party payment tool of China's e-commerce leader Alibaba, allowing users to process online financial transactions faster by using a temporary password sent to their cell phone after binding bank cards with the third-party payment account.

In contrast, online banking, run by retail banks, requires users to go through several webpages to validate personal information before accessing the payment page.

Quick payment seems more convenient, but the banks are concerned over its security and believe that capping the amounts in transactions could lower the risk for individuals.

"The quick payment method, supported by firms like Alipay, easily allowed users to get the money in their bank accounts stolen [if criminals accessed their phone]," a customer service employee with Industrial and Commercial Bank of China (ICBC) told the Global Times. From late February, ICBC started allowing users of the quick payment service to only transfer up to 5,000 yuan for each transaction and 50,000 yuan per month.

According to media reports, some users of online wealth management platforms have had their money stolen.

Zhou Xiaochuan, governor of the People's Bank of China (PBC), said on March 4 during the annual session of the National Committee of the Chinese People's Political Consultative Conference that regulations for services like Yu'ebao will be improved.

Zhang Daosheng, a spokesperson for Alipay, refused to comment on the banks' move when contacted by the Global Times, but said that the current average amount of money transferred into Yu'ebao is just thousands of yuan per person, suggesting the impact seems limited.

In addition to security concerns, these banks also intend to slow down deposit outflow, Wang Mingfei, a banking industry analyst with Shanghai-based Oriental Securities, told the Global Times Thursday.

Many Chinese people are accustomed to transferring deposits into domestic higher-yield online wealth management products via quick payment, which made it harder and more expensive [by offering higher rates] for commercial banks to attract money from people to fuel traditional lending, echoed Li Ye, an industry analyst with Analysys International.

As of February 27, Yu'ebao's total assets reportedly reached nearly 350 billion yuan ($56 billion) with over 81 million users. Tencent's WeChat users reportedly transferred 1 billion yuan to its online wealth management platform - Licaitong - on the second day of its launch on January 22.

According to the PBC, traditional bank deposits decreased by 940.2 billion yuan in January 2014 from 104.38 trillion yuan at the end of December 2013.

Actually, public enthusiasm toward online monetary funds has been gradually cooling down in recent days amid the decreasing yield, and the banks' quick payment limit may slow the growth in online monetary funds' total assets, said Wang.

The seven-day annualized rate for Yu'ebao kept dropping to reach 5.647 percent Thursday from 6.001 percent on March 1. The rate for WeChat's Licaitong also fell to 5.842 percent Wednesday from 6.068 percent on March 1.

However, Li told the Global Times Thursday that the banks' move is likely to slow down the money transfer to Yu'ebao-style platforms in the short term, but can hardly impact all Internet financing products, noting that users can still buy online monetary funds through online banking.

Internet financing is the trend, and traditional banks need to embrace it, but they will occasionally set or lower the quota of transfer amounts to maintain profitability, she said.

ICBC, as well as ABC and CMB, previously did not have any limits for quick payment transactions.